Greenbrier Cos. (NYSE: GBX) reported Q3 EPS of $1.05, $0.91 better than the analyst estimate of $0.14. Revenue for the quarter came in at $762.6 million versus the consensus estimate of $616.06 million.

Third Quarter Highlights

• Achieved $1 billion liquidity target through combination of cash, borrowing capacity, and spending reductions. Liquidity consists of $735.3 million in cash and available borrowing capacity of $136.8 million; lower capital expenditures of $50.0 million, reduced annualized selling and administrative expense of $30.0 million and reduced annualized overhead expense of $65.0 million.
• Generated operating cash flow in excess of $220.0 million in the quarter from decreases in working capital and robust syndication activity. This offset a working capital increase in the first six months of the year, resulting in nine months year-to-date operating cash flow of $89.0 million.
• Diversified new railcar backlog as of May 31, 2020 was 26,700 units with an estimated value of $2.7 billion, including orders for 800 railcars valued at approximately $65.0 million received during the quarter.
• Net earnings attributable to Greenbrier for the quarter were $27.8 million, or $0.83 per diluted share, on revenue of $762.6 million. Net earnings include a $2.5 million, net of tax, ($0.08 per share) of integration related expenses from the American Railcar Industries (ARI) acquisition and $4.8 million, net of tax, ($0.14 per share) of severance expenses.
• Adjusted net earnings attributable to Greenbrier for the quarter were $35.1 million, or $1.05 per diluted share, excluding $7.3 million, net of tax, ($0.22 per share) of integration and severance expenses.
• Effective tax rate of 41.2% in the quarter reflects unfavorable discrete items impacted by exchange rate volatility.
• Adjusted EBITDA for the quarter was $99.9 million, or 13.1% of revenue.
• Board declares a quarterly dividend of $0.27 per share, payable on August 19, 2020 to shareholders as of July 29, 2020.

William A. Furman, Chairman & CEO commented, "Greenbrier delivered strong operational results in the quarter while maintaining a constant focus on the safety and health of our employees through the pandemic and its related economic shocks. Third quarter performance reflects our near-term priorities of keeping our factories operating under essential industry status, significantly increasing liquidity and adjusting our capacity to align with our evolving demand expectations. Entering the fiscal fourth quarter Greenbrier's cash position was $735.3 million. As we increased cash, our net debt decreased by over $190 million, the lowest level in four quarters. We have taken difficult measures required to achieve our liquidity and cost reduction targets. Greenbrier is exceptionally well-positioned to compete and succeed during this weaker period in the economy and our core markets."

Business Update & Outlook

The COVID-19 pandemic has crystalized Greenbrier's strategy for the balance of fiscal 2020 and into fiscal 2021. Most importantly, we are protecting our employees from its spread within the work environment. Since forming an incident response team to address the then-emerging crisis in late February, we have worked diligently to protect employees from the spread of COVID-19 while working in Greenbrier facilities. To date, a small fraction of our total workforce of over 13,000 employees have tested positive. We are very pleased that all affected employees have or are expected to recover. Community spread of COVID-19 has increased in recent weeks in many areas where we operate, requiring additional vigilance and employee communications. We are working toward maintaining a low incident rate of COVID-19 among our employees by remaining focused on their health and enhancing the preventative and remedial actions of the rapid response teams across the company.

We are also preserving the near-term and longer-term financial health of Greenbrier in response to the economic consequences of the pandemic. Maintaining cash flow and liquidity are essential components of Greenbrier's current operating strategy. We have addressed our cost structure by reducing operating expenses and capital expenditures. Selling and administrative expenses for the quarter were $49 million and we expect further reductions in the fourth fiscal quarter. We have also executed a temporary restructuring of the GIMSA joint venture to improve profitability and cash flow for the partners. Depending on production scheduling, this restructuring alone could provide over $40 million of cash to Greenbrier through the first half of fiscal 2021 with an accompanying boost to earnings.

Greenbrier continues its manufacturing rationalization programs across our North American production network in response to current levels of demand. In the first three quarters of the year, we closed 11 rail productions lines and continue adjusting capacity to align with the demand outlook. As a result of these actions, total employment in North America has been reduced by about 40%, or about 5,300 employees, including both staff and production employees at the end of the third quarter. Despite these pressures, Greenbrier's Manufacturing business delivered a total of 5,900 units in the quarter. Based on current backlog, we are left with minimal open production capacity for the remainder of both the fiscal and the calendar year.

Over the past 18 months, Greenbrier has accomplished many strategic objectives, including the acquisition of the manufacturing business of ARI, the largest in our history. These initiatives have produced a strong franchise, highlighted by industry leadership, product and geographic diversity. While the rail sector globally has been weaker recently than normal, it is an important and vitally strategic industry to all economies worldwide. We expect its recovery will be a leading indicator of the broader economic recovery, post-pandemic. Greenbrier is focused on the safety of our employees, generating strong cash flow to maintain liquidity, and sizing our business to fit the lower demand environment. Achieving these priorities will ensure Greenbrier emerges strongly from today's challenges.

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